Rate rise fears likely to unsettle market
By Fu Chenghao |
June 20, 2011, Monday
|
Print Edition
Print Edition
SHANGHAI stock market is expected to remain weak this week on concern the central bank will raise interest rates to cool inflation.
The benchmark Shanghai Composite Index lost 2.3 percent to 2,642.82 points last week after the People's Bank of China announced it would raise lenders' reserve requirement ratio for the sixth time this year as data showed inflation in May was 5.5 percent, the highest in 34 months.
Shenyin and Wanguo Securities said inflation in June could be even higher, so further monetary tightening is almost unavoidable.
"The market could see further pullbacks in the next two weeks before bottoming out in early July," the brokerage said in a note, forecasting the key index to fluctuate between 2,600 and 2,680 points this week.
A Pacific Securities analyst agreed that the market will likely drop further in the mid-term.
"The market is still worried about an interest rate hike," the analyst wrote in a note.
Pacific Securities sees this week's range at 2,580 to 2,710 points.
The PBOC raised the yield on its three-month bills last Thursday, a move some strategists saw as a strong signal interest rates will rise.
Banks led a retreat last Friday on speculation higher interest rates will curb loan growth while metal producers slid over fears slowing economic growth will affect demand.
The benchmark Shanghai Composite Index lost 2.3 percent to 2,642.82 points last week after the People's Bank of China announced it would raise lenders' reserve requirement ratio for the sixth time this year as data showed inflation in May was 5.5 percent, the highest in 34 months.
Shenyin and Wanguo Securities said inflation in June could be even higher, so further monetary tightening is almost unavoidable.
"The market could see further pullbacks in the next two weeks before bottoming out in early July," the brokerage said in a note, forecasting the key index to fluctuate between 2,600 and 2,680 points this week.
A Pacific Securities analyst agreed that the market will likely drop further in the mid-term.
"The market is still worried about an interest rate hike," the analyst wrote in a note.
Pacific Securities sees this week's range at 2,580 to 2,710 points.
The PBOC raised the yield on its three-month bills last Thursday, a move some strategists saw as a strong signal interest rates will rise.
Banks led a retreat last Friday on speculation higher interest rates will curb loan growth while metal producers slid over fears slowing economic growth will affect demand.
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